European corporate venture capital teams should reflect on their rights in light of falling valuations, revised exit expectations, and other challenges.

By Richard Butterwick, Beatrice Lo, Shing Yuin Lo, Mike Turner, Jon Fox, and Catherine Campbell

This year has been challenging for venture capital (VC). Valuations of VC-backed companies listed on the public markets dropped by 74.2% in the first half of 2022, and evidence indicates private valuations are also declining. While the downturn underlines growing challenges for early and late-stage emerging companies, it also presents risks and opportunities for large corporates, who have significantly increased their presence in VC deals in recent years — with participation growing by 462.5% in the decade to 2021. In Q4 2021, corporate VC participated in 2,858 deals with an aggregate value of US$98.7 billion, a record high.

Given the significant increase in the number of corporates participating in the VC and growth equity space, many corporate VC teams will be dealing with a downturn for the first time. In our view, corporate VC teams should proactively seek to understand any downside protections they benefit from in order to position themselves to manage risk and maximise prospective opportunities.

Despite certain regulatory and challenges, PE buyers will likely see more investment opportunities in the gaming industry.

By Neil Campbell, Greg Roussel, Mike Turner, Adam Czernikiewicz, David Walker, Tom Evans, and Catherine Campbell

The global gaming market reached a valuation of US$135.8 billion in 2020, accounting for a staggering 53.3% of the digital media industry. Further, global video game revenue in 2020 jumped by 20% to US$179.7 billion, making the sector larger than the film and North American sports industries combined.

As private equity targets emerging companies, PE investors are expanding VC deal terms and dynamics.

By Mike Turner, Shing Lo, Tom Evans, Robbie McLaren, Farah O’Brien, David WalkerJon Fox, Katie Peek, and Catherine Campbell

Emerging companies have historically been backed by venture capital funds, but as Europe’s startup scene matures, involvement by more traditional private equity investors is growing, particularly in the tech, consumer, and digital health sectors. The number of PE investments in emerging companies has increased year on year, with investments in companies such as Wolt, Moonbug Entertainment, Zwift, Klarna, Epic Games, and Oatly demonstrating the range of opportunities available to PE sponsors in this space. While PE investors are increasingly familiar with VC deal dynamics, they are also pushing to align growth-deal terms more closely with traditional buyout concepts.